STAKING DEBATE
The Securities and Exchange Commission is currently discussing whether Ethereum ETFs should have the option of staking Ethereum after they are approved to begin trading. This process involves locking up tokens to secure the blockchain and earn additional coins, with an estimated annual yield of around 4%. This feature was initially excluded from the ETFs seeking approval back in May, however, SEC Commissioner Hester Peirce has suggested that it might be reconsidered once trading starts. Nonetheless, SEC Chair Gary Gensler has maintained that staking constitutes an investment contract, and as of now it remains uncertain of whether staking will be allowed or not. Nevertheless, despite this, it is worth noting that market analysts still anticipate strong demand for Ethereum ETFs, forecasting over $5 billion in net inflows within the first few months of trading. These new products are expected to hit the market next Tuesday.
SOFTER ECONOMY
The recent release of the Federal Reserve’s Beige Book has suggested a potential shift in economic conditions, reinforcing the belief that rate cuts could be implemented this year. The Beige Book revealed that U.S. economic activity has softened, with reports of slower growth in 5 out of the 12 regions. Consumer spending was noted to be cautious, with some districts reporting reduced activity in the retail and auto sectors. Furthermore, businesses expressed a sense of uncertainty due to ongoing trade disputes and global economic challenges. These factors, coupled with concerns over inflation and growth, have sparked discussions among policymakers about the possibility of rate cuts, and while there is no immediate need for interest rate cuts, the groundwork seems to be subtly laid for a potential rate cut in September. Moreover, business contacts are anticipating weaker activity in the coming months due to uncertainties such as the upcoming presidential election, domestic policies, geopolitical conflicts, and inflation. Nonetheless, the potential for a rate cut may help to address these concerns and provide some support for the economy as it navigates through these challenges.
SIGNS OF SLOWDOWN
The latest data on initial applications for U.S. unemployment benefits has revealed a concerning trend of increased claims, indicating a softening labor market. With a rise of 20,000 to 243,000 in the week ending July 13, matching levels from August 2023, and continuing claims soaring by 20,000 to 1.87 million, the highest since November 2021, these figures suggest a slowdown in hiring. The current economic climate, influenced by seasonal fluctuations and holidays like Independence Day, is showcasing a moderation in job market growth, alongside a recent uptick in the national unemployment rate to 4.1%, the highest since 2021. This shift, coupled with the recent cooling of inflation, further strengthens the case for potential interest rate cuts in the coming months.
PRICES ON THE RISE
Growing expectations of a possible U.S. interest rate cut in September are driving up demand for gold, pushing prices closer to a recent record high. Spot gold rose by 0.2% to $2,464.29 per ounce, following a peak of $2,483.60, and factors, such as declining interest rates and the upcoming U.S. elections are anticipated to propel gold prices above $2,500. In addition, let’s remark that the allure of gold as a safe-haven asset in the face of economic uncertainties is amplified by lower interest rates and a renewed interest from financial advisors and institutions, and signals from the Federal Reserve regarding potential monetary policy adjustments along with modest economic growth are shaping a positive outlook for gold. Experts such as those from Citi Research are forecasting continued growth in gold and silver prices amidst concerns of global trade tensions, offering a viable hedge against market volatility.
INTERNATIONAL NEWS
The European Central Bank (ECB) has announced its decision to maintain its current interest rates, opting not to make any changes following the rate cut they implemented last month. The bank attributed this decision to the restrictive nature of current financing conditions and the persistence of high domestic price pressures, particularly in services. Although headline inflation in the euro zone dropped to 2.5% in June from the previous 2.6%, core inflation, excluding energy and food prices, remained stable at 2.9%, exceeding consensus forecasts. Analysts anticipate that the ECB will await further data on wages, economic growth, and productivity before considering any additional adjustments to monetary policy. Moreover, although the central bank has not promised a specific rate trajectory, market expectations suggest the possibility of two more 25 basis point cuts later this year.
